ATO to Review Processes for Tax Administration of Deceased Estates

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The death of a family member or friend is a very emotional and stressful time, especially if you are responsible for managing the deceased’s affairs. There are many different financial, tax, accounting and legal issues that can arise and it can become quite confusing and overwhelming.

We look forward to a number of practical solutions recommended by the Inspector-General of Taxation and Taxation Ombudsman (“IGTO“) being implemented by the Australian Tax Office (“ATO“) in the next few years and anticipate these improvements will significantly ease the administration burden involved in the tax administration of a deceased estate.

IGTO report

On 7 July 2020, the IGTO, Ms Karen Payne released a report on her investigation into the ATO processes for dealing with deceased estates.

The investigation was prompted by the high number complaints received in relation to the ATO and the tax administration of deceased estates. The complaints covered a range of different areas, however the common concerns related to delays by the ATO, dissatisfaction with the level of advice or guidance provided by the ATO and the general confusion and lack of information available.

The IGTO report included 10 recommendations and the ATO has agreed in full, in part or in principle with the vast majority of these recommendations.

Review of ATO guidance material

The ATO has agreed to review its guidance material regarding deceased estates, in consultation with external stakeholders, with a view to improving the guidance:

  • to make it easier to understand for people who are not familiar with the area; and
  • to provide more detailed information for professionals for the more complex circumstances.

Specifically, the ATO agreed to confirm their position on how the relevant tax law applies to information disclosures where a grant of probate or letters of administration has not yet, or will not be obtained, which is an issue currently lacking clarity and the source of many complaints.

Digital notification of death

The ATO has agreed in principle with the recommendation that the ATO:

  • allow the official notification of death to be done digitally; and
  • enable such notifications to be made by registered tax practitioners who:

–  were previously engaged by the deceased person; and/or

–  have been newly appointed by the deceased’s legal personal representative/s.

The IGTO also recommended that the ATO explore opportunities to better integrate the notification of death across the whole of government and to liaise with key stakeholders within the existing end-of-life processes to further enhance the efficiency of the notification process and the content of death notification information.

Simplifying tax filing requirements for the deceased taxpayer

Further, the IGTO recommended that the ATO review and simplify the tax filing requirements in relation to a deceased taxpayer. While the ATO agreed in principle and confirmed that they would explore the concept of simplifying deceased tax filing requirements, they highlighted that the development and implementation of a new income tax return for deceased estates would require significant resources and they would need to assess the cost, priority and benefits associated with the work against other priorities.

The ATO noted that currently 95% of deceased estate tax returns are lodged by tax practitioners.

Post implementation review

The ATO will conduct a post implementation review of the recommendations made by the IGTO and the responses provided by the ATO within 5 years.

If you would like to find out more contact us on (07) 3221 9744 or visit our website to get started with your estate planning online.

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